By Duruthu Edirimuni Chandrasekera
In three months the Colombo stockbrokers are set to have their systems integrated and hi-tech making it seamless for them to transact. This will lead to Delivery versus Payment, Central Counter- party along with risk management that will lead to new products being introduced such as short selling and derivatives, officials said. ”Short-selling for an example will form some level of mitigation from the downward slide that the Colombo Stock Exchange (CSE) is now experiencing which helps traders to profit in a down market or protect existing investments while securing risk management feactures,” Ravi Abeysuriya, President Colombo Stock Brokers Association (CSBA) told the Business times. He said that (share transaction) order management and broker back -office systems will be in place by April 31.
He added the infrastructure in Sri Lanka’s capital markets have been stagnant for the past decade and it’s time they’re uptodate. CSBA has proposed a mobile solution to the recording system that was incorporated into the stockbroker rules in August 2012 by the CSE which stipulates the brokering houses to use a telephone recording system to record clients’ order instructions and maintain these records for at least six years. “This is to be introduced to fill the gap in recording mobile phone calls (when clients give instructions on Mobil transactions).” Mr. Abeysuriya noted that the absence of a professionally managed non captive large institutional investor base in Sri Lanka is an enormous challenge. The main long term superannuation funds are largely captive and are saddled with conflict of interest.
He added that if the ‘indispensable’ State Owned Enterprise (SOE) reforms are brought about, it would lead to a mixed ownership structure and more transparency, management efficiency and reducing the dependence on taxpayers. “This would classify the CSE as a more developed and mature ‘emerging market’ that is widely tracked by foreign investors and considered to be active and liquid than a ‘frontier market’. CSE would be included in the MSCI Emerging market Index with the listing of a few SOEs and many large and successful companies.” Mr. Abeysuriya added that as a result, a significant amount of foreign investors that replicate the MSCI Emerging Market Index (tracked by investors managing about US$8 trillion in assets) would have invested in Sri Lanka.
“Several new products such as Real Estate Investment Trusts (REITS) and Exchange Traded Funds would have been listed in the CSE, providing retail investors wider flexibility and an avenue to gain entry into the real estate market with a small amount of capital and liquidity to exit. These would have led to increasing the depth and breadth of the market and increasing the market capitalisation of the CSE as a percentage of GDP at least to about 50 per cent.” The capital market in Sri Lanka is under -owned by domestic investors versus its emerging market peers. Only 6.5 per cent of the Rs. 3.1 trillion market capitalisation of the CSE is owned by institutional institutions such as EPF, ETF, Insurance Companies and Unit Trusts. “This needs to change,” Mr. Abeysuriya added.
In three months the Colombo stockbrokers are set to have their systems integrated and hi-tech making it seamless for them to transact. This will lead to Delivery versus Payment, Central Counter- party along with risk management that will lead to new products being introduced such as short selling and derivatives, officials said. ”Short-selling for an example will form some level of mitigation from the downward slide that the Colombo Stock Exchange (CSE) is now experiencing which helps traders to profit in a down market or protect existing investments while securing risk management feactures,” Ravi Abeysuriya, President Colombo Stock Brokers Association (CSBA) told the Business times. He said that (share transaction) order management and broker back -office systems will be in place by April 31.
He added the infrastructure in Sri Lanka’s capital markets have been stagnant for the past decade and it’s time they’re uptodate. CSBA has proposed a mobile solution to the recording system that was incorporated into the stockbroker rules in August 2012 by the CSE which stipulates the brokering houses to use a telephone recording system to record clients’ order instructions and maintain these records for at least six years. “This is to be introduced to fill the gap in recording mobile phone calls (when clients give instructions on Mobil transactions).” Mr. Abeysuriya noted that the absence of a professionally managed non captive large institutional investor base in Sri Lanka is an enormous challenge. The main long term superannuation funds are largely captive and are saddled with conflict of interest.
He added that if the ‘indispensable’ State Owned Enterprise (SOE) reforms are brought about, it would lead to a mixed ownership structure and more transparency, management efficiency and reducing the dependence on taxpayers. “This would classify the CSE as a more developed and mature ‘emerging market’ that is widely tracked by foreign investors and considered to be active and liquid than a ‘frontier market’. CSE would be included in the MSCI Emerging market Index with the listing of a few SOEs and many large and successful companies.” Mr. Abeysuriya added that as a result, a significant amount of foreign investors that replicate the MSCI Emerging Market Index (tracked by investors managing about US$8 trillion in assets) would have invested in Sri Lanka.
“Several new products such as Real Estate Investment Trusts (REITS) and Exchange Traded Funds would have been listed in the CSE, providing retail investors wider flexibility and an avenue to gain entry into the real estate market with a small amount of capital and liquidity to exit. These would have led to increasing the depth and breadth of the market and increasing the market capitalisation of the CSE as a percentage of GDP at least to about 50 per cent.” The capital market in Sri Lanka is under -owned by domestic investors versus its emerging market peers. Only 6.5 per cent of the Rs. 3.1 trillion market capitalisation of the CSE is owned by institutional institutions such as EPF, ETF, Insurance Companies and Unit Trusts. “This needs to change,” Mr. Abeysuriya added.
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